Fidelity National Information Services, Inc. (FIS - Analyst Report) is set to report second quarter 2014 results on Jul 29. Last quarter, it posted a 21.43% positive surprise. The company has posted an average positive earnings surprise of 16.35% over the past four quarters.
Let’s see how things are shaping up for this announcement:
Growth Factors This Past Quarter
We believe that Fidelity’s commanding position in the financial services market; increasing international exposure, recurring revenue model, diversified product portfolio, cost synergies from acquisitions and a loyal customer base are significant positives.
The recent acquisition of Reliance Financial Corporation will enable Fidelity to provide a full-service wealth management and retirement offering encompassing technology.
Moreover, strong demand for its solutions is expected to boost top-line growth in the near term. The company continues to win contracts from banks and financial institutions internationally, which will further drive its market share.
Fidelity’s licensing agreement with Visa to offer EMV enabled debit cards to its NYCE Payments Network partners is a key growth catalyst.
However, increasing consolidation in the banking sector, challenging environment for the Payments Solutions business and uncertain regulatory environment are the primary headwinds, in our view. Moreover, intensifying competition from the likes of Fiserv is a major concern in the near term.
Our proven model does not conclusively show that Fidelity is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 63 cents. Hence, the difference is of 0.00%.
Zacks Rank #3 (Hold): Fidelity’s Zacks Rank #3, when combined with a 0.00% ESP, makes surprise prediction difficult.
We caution against stocks with Zacks #4 and #5 Ranks (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Silicon Motion Technology Corp. (SIMO - Analyst Report), Earnings ESP of +12.9% and a Zacks Rank #1 (Strong Buy)
Iron Mountain Inc. (IRM - Analyst Report), Earnings ESP of +7.69% and a Zacks Rank #2 (Buy)
Cognizant Technology Solutions Corp. (CTSH - Analyst Report), Earnings ESP of +6.90% and a Zacks Rank #1 (Strong Buy)